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Proceedings of the Standing Senate Committee on

Issue 7 - Evidence - May 5, 1998

OTTAWA, Tuesday, May 5, 1998

The Standing Senate Committee on Fisheries met this day at 6:55 p.m. to consider the questions of privatization and quota licensing in Canada's fisheries.

Senator Raymond J. Perrault (Deputy Chairman) in the Chair.


The Deputy Chairman: This is a meeting of the Standing Senate Committee on Fisheries. The committee is meeting today to continue its work on the order of reference it received from the Senate on November 19, 1997, to conduct a study into the questions of privatization and quota licensing in Canada's fisheries.

The first witness from Vancouver will be Mr. Peter Pearse. He is a well-known forest management consultant at the University of British Columbia, an internationally recognized natural resource economist, a leader in the debate on rights-based fishing, and a Canadian authority on fisheries management, who helped design the ITQ system in New Zealand in the 1980s.

In the early 1980s, Mr. Pearse headed the federal commission on Pacific Fisheries Policy established in January of 1981, which produced in 1982 one of the most comprehensive studies ever conducted on Canada's fisheries in the Pacific. Entitled "Turning the Tide: A New Policy for Canada's Pacific Fisheries," his report proposed the adoption of quota licence systems for every major and minor fishery in British Columbia, except for the salmon and roe-hearing fisheries.

Mr. Pearse also led a comprehensive inquiry into Canada's freshwater fisheries in 1988. His report "Rising to the Challenge: A New Policy for Canada's Freshwater Fisheries" was published by the Canadian Wildlife Federation.

More recently, Mr. Pearse wrote "Allocating the Catch Among Fishermen: A Perspective on Opportunities for Fisheries Reform" published by the Atlantic Institute for Market Studies.

Mr. Pearse, you have been allocated a maximum of 30 minutes for your opening statement. If you only speak 20 minutes, then we shall have more opportunities for questions. I would ask members of the Committee to observe the rule that their questions directed to Mr. Pearse shall be no more than five minutes.

Mr. Pearse, we certainly welcome you, electronically, to Ottawa.

Dr. Peter H. Pearse, as an individual: Thank you, Senator Perrault. I must say, it is an honour to have been invited to participate in this Senate committee's hearings. I would like to say, also, that I am delighted to learn that your committee is investigating the whole question of quantitative rights for fishermen as a fisheries policy matter.

I should tell you at the outset that I am sort of a godfather to this idea, in the academic world. I am a strong proponent of it on the basis of what I have seen in terms of its application, both in Canada and in other countries.

I would like to begin my remarks by making the obvious observation that our traditional systems of managing fisheries have failed us. This is a popular thing to say now, and it is obvious that we have serious problems of stock collapses on both the Atlantic and Pacific coasts. There are thousands of people now displaced and out of work as a result of this, and it is nothing short of an economic, social and, indeed, an environmental, disaster.

I would like to emphasize that the system was not working well even before the stocks collapsed. The fishing industry on both coasts was performing well below its potential, so it would be irresponsible to continue with the traditional ways of managing our fisheries. We need a fundamental new approach.

Secondly, fisheries policy is changing everywhere in the world at the moment in a rather fundamental way. These changes are being driven by technological changes, which have clearly overtaken our policy framework and our traditional institutions of management. We are in a crisis of policy, and crisis means a turning point. In that sense, we are at a turning point in our policy on fisheries. It clearly cannot go on. The mature fisheries around the world are now all in either a depressed or a depleted condition. We have to look around, and take the benefit of experiments around the world to figure out where we are going to go, to avoid making mistakes that have been made elsewhere and, indeed, mistakes that we have made here in Canada.

At the risk of sounding a bit pedantic, I would like to begin by sketching very briefly how our fisheries policy developed, especially the nature of the rights to fish, because it is this that makes us focus on the nature of an ITQ or a quantitative rights system.

I think that we are probably all aware that many centuries ago, the doctrine was established that fish in the sea belonged to nobody and that everyone had a right to catch the fish. Way back in Roman law, the idea was that property could not exist unless the thing over which property rights were established could be possessed. Since fish in the sea could not be possessed, they could not be considered property. King John of England, when he signed the Magna Carta in 1215, also relinquished the Crown's authority to grant private fishing rights, and entrenched the idea of public fisheries. Four centuries later, Dutch jurist Hugo Grotius established the famous doctrine of the "freedom of the sea," and the concomitant view that property did not exist on the high sea and that rights to fish and everything in the sea belonged in common to everybody. Everybody had an equal right to fish.

That idea was fine for centuries, and it became deeply entrenched. It made a lot of sense, because as long as there were more fish than anybody demanded, there was no point in trying to establish any kind of property right over the fish. They were not scarce and they did not have to be allocated and rationed. Over the years, as fishing industries expanded and the technology of fishing grew, the most valuable stocks, the most vulnerable stocks, like whales, some shellfish, salmon, began to become depleted because they were overfished. Sometimes governments tried to protect them with various sorts of restrictions, but for years the fundamental right of fishing did not change significantly.

About 40 years ago, people began to worry that there was something fundamentally wrong with all of this. As long as the fishery was profitable, it would attract more fishermen. Even if the fishing fleets were already over-expanded, people would still come in to take advantage of the profitability of it. Certain economists believed that the fisheries were sort of condemned to a kind of a Malthusian equilibrium, where all the profits would be dissipated and you would have what is referred to as the "tragedy of the commons." The evidence of this lay in the almost universally low incomes of fishermen. It was explained that when demands on resources exceed the available supply, you get two problems: the over-expansion of fishing, the depletion of the stocks and the resulting conservation problem; and the other problem is that profits get dissipated, and you have an economic problem. Even potentially very rich fisheries, like the salmon fishery on this coast, will over time yield low incomes because the potential economic rents in the fishery tend to get dissipated.

These two tendencies, the overfishing of stocks and the dissipation of economic rents, became worldwide phenomena in the second half of this century. We could add a third problem, a regulatory problem, for as fishermen continued to respond to incentives to improve the technology of fishing when fisheries were already fully exploited, governments had to react with an accelerating burden of regulation.

In Canada, in the 1960s, the Government of Canada tried a major innovation in fishing rights. It began with the Davis plan in the Pacific salmon fishery, which established a limit on the number of vessels. In other words, it involved giving a licence to each of the existing vessels and issuing no more. Fishers adapted to this licence limitation policy remarkably quickly, and within 15 years, it applied to all the major fisheries on both the Pacific and Atlantic coasts. It was adopted by many other fishing nations as well.

In terms of the rights of fishermen, this licence limitation policy implied a very fundamental change. Previously, everybody had an equal right to fish, so in a legal sense, the right to fish lacked an essential characteristic of property: the right to exclude others. The licence limitations changed that because, while fisheries remained common property, access to them was now limited. Anybody who did not hold a licence was now excluded. They could only get into the fishery by purchasing the licence of somebody who already had a licence and thereby displacing him.

Now, restricting the number of boats seemed to be an obvious thing to do in an overcrowded fishery, but it encountered very strong opposition. It is so well accepted now that we tend to forget that, but it was very widely opposed by fishermen. They did not appreciate the need for it. They thought that the role of government was to preserve the stocks and just leave the fishermen alone. If too many got in there to fish, some would go broke, but there was no need for the government to interfere.

In any event, licence limitation was not as effective as many people hoped. It created an incentive to build bigger and technologically more advanced vessels, and to continue to invest capital in the fishery. The catching power of the fleets tended to continue to increase, even though the number of vessels did not. Governments in Canada tended to aggravate that problem by subsidizing people in the fishery, through both subsidies to labour and subsidies to capital entering the fishery.

In efforts to forestall those tendencies, governments put more and more restrictions on boats, their hold capacity, their length and so on. That really did not work very well because fishermen are very ingenious, as are naval architects, in terms of getting around some of these regulations, and so the fleets tended to continue to grow. Governments had to protect stocks by continuously shortening seasons and adding more and more fishing restrictions.

Around the 1970s, some of us in the academic world began writing about the idea of stinting the fisheries, that is dividing up the available catch among the licenced fishermen. The idea was that if every fisher had a right to take a specific quantity of fish, and the sum of those quotas was the sustainable harvest, they would no longer have to engage in the competitive race to obtain their shares of the catch, preferably at a cost to other fishermen. Moreover, if their quotas were transferable, they could buy and sell them and adjust the scale of their operations and improve their efficiency and thereby rationalize the fleet. This individual quota approach was recommended, as Senator Perrault mentioned, in my 1982 report of the Royal Commission on Canada's Pacific Fisheries, and it was adopted as well by the Kirby task force in its proposals for enterprise allocations on the Atlantic Coast. Within a remarkably short time, quota licences, which are variously referred to as ITQs, or IQs, or IVQs, enterprise allocations and catch quotas, were introduced in several countries, including Canada. It has been pretty slow in terms of its development in Canada, compared to some other countries.

Individual quotas implied another fundamental change in the nature of fishing rights. They add another dimension of property to the rights held by the holders, and that is done by defining, quantitatively, the shares in the total catch. That helps in overcoming both the conservation problem and the economic problem that I referred to earlier. It eliminates this wasteful, zero-sum game of racing to the fish in competition with the other fishermen. It also eliminates the tendency to over-expand the fleet when the fleet is already overcrowded. It can -- at least in certain conditions -- simplify the task of protecting the stocks from overfishing.

We now have a great deal of experience around the world with individual quotas. These various fisheries have been analyzed and the results published. This adds a certain amount of empirical observation to the predictions of theorists who have promoted the idea of individual quotas. In general, the evidence is very impressive. Where individual quota systems have been adopted to their fullest extent, notably in New Zealand and Iceland, it is hardly an exaggeration to say that the fisheries have been revolutionized. The economic performance of the fisheries generally has improved enormously. Fishermen's incomes have risen; the quality of the product has improved; prices received by fishermen have improved; and the task on regulatory agencies in protecting stocks from overfishing has been significantly alleviated.

Those are the generalizations. Individual quotas have the advantage of realigning fishermen's economic incentives to maximize the value of their share of the catch. The result is a continuing effort on the part of every quota holder to generate the biggest possible return from his share of the catch, by increasing the value of his landings, and reducing his costs, and preferably cooperating with others to increase the pie in total. These incentives are much more consistent with what we depend on in other industries in a market economy, to ensure that producers are efficient and behave in the public interest.

I would like to draw attention to two particularly beneficial effects of individual quotas, which we did not expect when we began thinking about how they would be organized a couple of decades ago. Firstly, we thought that ITQs would improve the economic performance of fisheries mainly by encouraging fishermen to rationalize the fleet by buying up quotas from each other and thereby voluntarily reducing the fleet, reducing the total cost of fishing, and thereby improving the net return from the fishery as a whole.

Experience has shown that there is another effect at work here, that benefits accrue in the value of the catch. One of the best examples is the Pacific halibut fishery, which has now been experimenting with a quota system for some years. There, fishermen found that once they had a defined share of the total catch, they could improve their returns by catching the fish at the time of year when they generated the highest return, when they could sell their fish in the fresh market instead of the frozen market and thereby get a better price. They could take their time cleaning and handling the fish in ways that would best preserve their value. This was better than the hectic free-for-all of trying to catch all the fish in a few days, which was the rule before, and then having to sell them all in the frozen fish market. The improved prices that fishermen got was a major contributor to the improved performance of the halibut fishery. As you probably know, the performance of the halibut fishery has now been so remarkable, that the United States, in Alaska, which has a much bigger halibut fishery than ours, has now opted to follow the Canadian example. They found that Canadians were selling Canadian fish in American markets when Americans could not; and they were also getting a much higher price for them in the fresh markets of the Pacific Coast.

Another effect was not expected, or was at least underestimated. Once fishermen get quotas, they have something that is valuable, and significant wealth is developed in the form of quota holdings. Experience in New Zealand and elsewhere shows that quota holders, once they find themselves with new and substantial assets in fishing rights, become very sensitive to any actions on the part of other fishers or poachers that encroach on them, or to anything anybody does to impinge on those assets or diminish the value of those rights, including governments. They become receptive to anything that will enhance the value of those rights. This seems obvious in retrospect, but it just was not expected. Fishermen are beginning to press for the increased legal security of these rights, and for vigilance in preventing poaching and the breaching of rules. They are beginning to cooperate with governments for better management, for enhancing the stocks, and so on. These are the ingredients of self-regulation and the opportunities afforded by individual quotas to shift the responsibility from management, from governments to fishermen. They are another effect which has become increasingly apparent as a result of individual quotas. These effects are fundamentally important, in my view, in terms of the long-term development of fisheries policy.

This is not to say that quotas are a panacea, of course. A great deal has been written about the problems associated with individual quotas. I am sure you will hear all about the problems involved in implementation, of monitoring and enforcement in some fisheries, of under-reporting, high grading, and discards.

I want to make two comments about these problems. First, insofar as they exist, they are very small problems compared to the problems of the open-access fisheries or even limited-licence fisheries. The economic performance under quota fisheries by and large has been so beneficial that it easily outweighs these difficulties.

The second point I want to make is that you cannot generalize about these difficulties, you have to look at it fishery by fishery. When people generalize about these problems, they miss the point that in many parts of the world all of these problems have been dealt with. While it is understandable that people should be apprehensive about them, you have to look at the individual fishery. The practical difficulties associated with individual quotas are often exaggerated. I am not saying that they are not important in some fisheries, but we have to focus particularly on the character of individual fisheries.

I am sure that you have heard that we should avoid giving fishermen who hold licences a windfall gain as an interest in a public resource. First of all, with respect to that concern, appreciation in value is not unique to individual quota rights. It happens with limited-entry licences as well, and has happened with a vengeance in some fisheries in Canada.

The increased value of these rights is a reflection of the improved economic performance of the fishery. To that extent, it should be welcomed, for it is evidence that the system is working.

If we do not want the resource rents to accrue to the individual holder of the fishing rights, it is not a difficult problem to devise policy arrangements to tax it away, or do whatever you like with it. It can be captured easily by landing fees, licence fees, rentals or something of that kind. From a government's point of view, it is a relatively easy problem to solve.

I should like to conclude with the point that when those who have the right to fish in a fishery are identified, and their shares are also fixed, the stage is set for cooperation. Evidence from individual quota systems around the world shows that quota holders have found it to be in their collective interest to take conservation measures, like adopting larger mesh sizes in nets, and cooperating in surveillance and enforcement. On this coast, for example, fishermen have voluntarily taxed themselves to improve the enforcement and monitoring of the fishery. Groups of fishermen that previously fought with government find it in their interests to cooperate, comanage and self-regulate. I think that in the longer run, this is the most profound implication of individual quota systems.

I think my time is up, Senator Perrault, so perhaps I should stop here. I am happy to respond to any questions from you or colleagues.

The Deputy Chairman: Thank you very much, Mr. Pearse. It was a very worthwhile presentation. I will introduce the people who will be asking the questions: Senator Comeau is Chairman of our committee and he comes from Nova Scotia. We have Senator Meighen from Ontario, Senator Cook from Newfoundland, Senator Robichaud from New Brunswick, Senator Jessiman from Manitoba, and on the other side Senator Stewart from Nova Scotia and Sister Butts from Nova Scotia, as well.

Senator Stewart: I have two questions. I know that this is a sensitive question in certain parts of the United States. I thought it might just be that it was sensitive in British Columbia.

Mr. Pearse, you said that the question of the applicability of the individual quota system had to be considered fishery by fishery. I notice that the document "Turning the Tide," to which our deputy chairman earlier made reference, proposed the adoption of quota licence systems for every major and minor fishery in British Columbia, except for the salmon and roe-herring fisheries.

What special characteristics do those two fisheries have that led to their exclusion from the quota licence system?

Mr. Pearse: Thank you, Senator Stewart. It is a very important question because they are our two most important fisheries on the Pacific Coast.

To manage a fishery easily, via an individual quota system, the regulatory authorities have to be able to determine, or to estimate, the total allowable catch (TAC) from the fishery. Then you can parcel it out. In most of these schemes, fishermen are given a percentage share of the total catch. You could do that with virtually all the fisheries on the Pacific Coast except the salmon and roe-herring fisheries. You cannot predict how many fish are going to be available to catch, or indeed even the total stock, until many of the fish have already passed through the fishery. For these are migratory fish and very difficult to predict. Even the fishermen themselves would not be able to know how many fish they could catch until the fishery was virtually over.

The answer to your question is because of the volatility of the catch. The difficulty of predicting the total available catch presents a difficulty in allocating shares in it, and in giving the fishermen any certainty about their available catch.

I should like to add that, in the particular case of the salmon fishery, we are talking about six different species, all with very different characteristics. There are several hundreds of stocks of each of those species, all of which have to be managed separately. The commercial fishery has three large sectors, which must have separate arrangements. There is Indian fishing, commercial fishing and recreational fishing on all of these, which presents a formidable administrative problem.

I hope you can see why these two fisheries are so complicated. We really do need a separate arrangement for them.

Senator Stewart: In the part of Nova Scotia from which I come, the lobster fishery is very important. The season there, Mr. Chairman, began on May 1, and in that part of the province it will be open until roughly the end of June. A lot of the lobster fishers whom I know are uneasy about the notion of an individual quota in that fishery. Do you know enough about the lobster fishery to be able to say anything useful on that point?

Mr. Pearse: Let me just respond by saying that, without exception, fishermen are apprehensive about this kind of a scheme until they try it. That is universal. It is a very fundamental break with the traditions of fishing. I am sure you know fishermen well enough to know that many fishermen are deeply committed to the concept of catching fish in competition with everybody else in an open, free-for-all fishery. The idea of individual quotas is seen by many fishermen as being another restriction on them, and they resist that. That is true wherever this has been tried, as far as I know. It is not until fishermen have tried it that they like it. As far as I know, in every place it has been tried, the fishermen would never want to return to an open access, free-for-all fishery.

Senator Stewart: You are using quite general language, but the implication of your answer seems to be that you would not rule out the lobster fishery as a fishery to which the individual quota system could be applied?

Mr. Pearse: No, I would not rule it out. I think it is quite feasible. In my enthusiasm for quotas, I do not mean to imply that this is an answer for all fisheries. There may be some fisheries that can be managed better other ways. However, I think from what I know of the lobster fishery, there is no reason why it could not apply perfectly well there.

Fishermen are always apprehensive about the initial allocation; it is a pervasive problem. The allocation is a very difficult thing for governments to determine. It is usually done by some grandfathering process based on previous years' catches or something like that, but it is always a subject of great contention. In my opinion, it is a problem that should be dealt with by the fishermen themselves. Governments should not have to worry about that.

Senator Jessiman: Mr. Pearse, I want to follow up on that first question. You explained why you left out the salmon and roe-herring fisheries, that there are so many different kinds of salmon. Could those two types of fishery be managed better in a different system? It has now been 16 years since you wrote your report. Or do you think that they could use this system out west for salmon and roe-herring today?

Mr. Pearse: Well, yes. In 1982, I believed that it would be a huge and formidable task, given the fact that we never had any experience with individual quotas at that time. However, if the government had adopted all my other recommendations, we would by now have had 15 years' experience with quota systems. There would have been a much greater acceptance on the part of salmon and roe-herring fishermen, having seen the experience of other fisheries. I am sure we would have figured out how to do it. However, our experience remains rather limited, so we would not be able to put in place that kind of a system.

Let me just say that now, in light of the halibut fishery's experience, some salmon fishermen are now very anxious to try an individual quota system in the troll sector. The troll sector catches fish with hook and lines, as you probably know, and that is a rather gradual fishery that is slower, and takes place over a longer season. There is no reason why it would not work there. These fishermen have been pressing the government to try it, and in my opinion they definitely should. We will learn something from that.

The fishery that is particularly difficult to manage is the roe-herring fishery. You may know that sometimes our seasons for roe-herring last only a few minutes. The fishing power is so huge that it is dangerous sometimes to open those fisheries -- it would just devastate the stocks. In that hectic kind of a fishery, it is very difficult to allocate quotas.

I think you need a different system for those two fisheries. You need a system that requires fishermen to cooperate, to get shares, but one where they do not all have to fish themselves. In other words, you could allocate shares in the catch without necessarily requiring the individual fishermen to catch their shares. The fishermen would have to cooperate to catch the available fish in some efficient fashion, which would probably mean with a fraction of the fleet, and allocate the benefits from those catches according to the holding of shares. There are various solutions.

Incidentally, another solution that is being touted around British Columbia quite strongly these days is the idea of allocating rights to communities along the coast. I am a little bit dubious about that, but you will probably hear people advocating it.

Senator Jessiman: What about the East Coast and the cod? You cannot bring the cod back. If it does come back, do you think that kind of system should be used on the East Coast?

Mr. Pearse: Absolutely. Cod would be a very good fishery to do it in. As a matter of fact, we already do it in connection with the offshore fleet, with the enterprise allocations. I think over half of the catch on the Atlantic, now, is caught through some form of enterprise allocations or quotas.

The trouble with the quotas so far in Canada, unlike New Zealand and Iceland, is that these are very frail rights. The fishermen do not have any guarantee. From a legal point of view, their rights have very little security. You cannot take quotas to a bank and borrow against them; you cannot transfer them flexibly; you cannot subdivide them. Quotas are a very frail, loosey-goosey kind of right.

To improve performance in the fishery, we need to give those rights much more security and definition so that they become more valuable and fishermen can make much better use of them.

Senator Jessiman: Do they have those kinds of rights in New Zealand and Iceland?

Mr. Pearse: Absolutely.

The Deputy Chairman: Senator Comeau is an Acadian from Nova Scotia and he is the chairman of the committee.

Senator Comeau: Thank you very much, Mr. Chairman. I want to thank you as well, Mr. Pearse, for appearing before us. Your testimony will be very valuable to us in the coming months.

I want to get back to a question that was raised by Senator Jessiman regarding the East Coast and the collapse of the northern cod. As we know, enterprise allocations were established in the early 1980s, and we got ITQs in the late 1980s. Since the 1980s, over half of the East Coast groundfish stocks have been under some form of privatized venture. Yet, under this mostly privatized venture, we saw the biggest collapse of a fish stock in the history of the world: the collapse of the northern cod stocks. We not only lost the northern cod stocks, we lost haddock and pollack as well during the intervening years.

It does not make a really great case for privatization of the fishery, if you look at the experience we have had in Canada. One of the reasons that may explain this is the fact that the legal standing of the property rights is very dubious. People may not, therefore, give it the kind of stewardship that they should if the property rights were much stronger.

I would like to maybe ask you the question: You point out in your paper three very basic elements of a good ITQ system: a stronger legal right, a legal standing; a government declaration that the former system is finished; and finally, a consultative body that would be made up and trusted by fishermen.

I am more interested in the question of property rights. Should ITQs be owned and traded as any other property rights, like land, buildings or what have you?

Mr. Pearse: To answer your question directly, an individual quota system will work best where the quota rights have the strongest legal character. Yet I must say I am a little bit uneasy about your term "privatization." I know that term is used in connection with individual quotas, but it seems to me to be inappropriate insofar as all we are doing is changing the nature of the rights held by fishermen to catch a common property resource. There is no question about changing the ownership of the fish in the sea. We are only talking about changing the rights of fishermen to catch them. We are not changing the ownership of the fish from public to private.

With respect to the business about the cod stocks, I know that everybody has a different reason for the collapse of the cod stocks -- a number of reasons have been bandied about -- but one of the things that is perfectly clear is that the government did not know what was happening to those cod stocks until it was too late. There was a problem with estimating the abundance of stocks, and it had to do with technology overtaking the evidence and so on, until it was too late.

There is nothing in the individual quota systems that will alleviate the problem of determining this abundance of fish in the sea. There is a little bit insofar as an individual quota system gives an incentive to fishermen to assist governments to get that right. If fishermen have a right to something that lasts well into the future, they are going to want to make sure that the value of that right is preserved by not diminishing it. Therefore, they have a much keener interest in getting good science in estimating stock abundance.

However, apart from that, there is nothing in the individual quota system that will solve the problem of estimating abundance. That really is a separate problem, I am afraid. The link between the individual quota system and the collapse of the cod stocks is not very close. You would have had that problem almost certainly with or without quotas.

Senator Comeau: I would not like to leave the impression, Mr. Pearse, that I agree with you that people who fish in what is termed the "common fishery" have no interest in the future of the fish stocks, either. I think that is a very unfair way of painting those who do not have ITQs, but I will not get into an argument.

My second point is that there has been no formal public debate, no objective evaluation of such regimes in Canada, as far as I know, since the introduction of ITQs and enterprise allocations.

Every once in a while Jeffrey Simpson of The Globe and Mail or some Ottawa Citizen writer will expound on the great benefits of ITQs. Otherwise, we get very little public debate on this subject, and what we do get is from the extremes on both sides. I guess this is what this committee is all about, trying to look at both sides of an issue without exaggerating.

I would like to ask you to comment on why the department did not initiate some kind of a public discussion on the subject, rather than present it through the back door as it has been doing?

Mr. Pearse: First, let me say that I am not aware of how the Department of Fisheries and Oceans has been handling this on the Atlantic Coast recently. However, I can tell you that there is now substantial literature on the performance of individual quota systems, not only in other countries like New Zealand, Iceland and Norway and elsewhere, but also in Canada. A very good evaluation has been made by the Department of Fisheries and Oceans of the ITQ system's performance in connection with the halibut fishery, and I think that there may have been a study also on the groundfish fishery. I believe that Bruce Turris, of the Department of Fisheries and Oceans here in the Pacific region, will testify. He is an expert, and indeed, I think he had something to do with writing the evaluation on the halibut fishery, which is by far our best example on the Pacific Coast so far.

With respect to the performance of these fisheries on the Atlantic Coast, there have been a number of papers on the subject. Last year I attended a conference organized in St. John's, Newfoundland, by the Atlantic Institute of Market Studies (AIMS). At that conference, a number of reports were presented about individual quota managed fisheries on the Atlantic Coast. One in particular that attracted my attention, and one that I would recommend to you, is written by a fisherman from Pubnico, Nova Scotia, on the south shore. He is involved in a ground fishery, a mid-shore fishery. It is an excellent view from a fisherman who was highly cynical about this whole approach a few years ago, but who has experienced a quota system and who now sees the benefits of it. He wrote a marvellous paper on the subject.

Senator Comeau: The gentleman you are referring to is a Mr. d'Entrement of Inshore Fisheries. I actually read the articles that he prepared and the presentations he made at the AIMS meeting. One of the AIMS articles compared the cod fishery, or the groundfish fishery in Atlantic, to the dying days of the Soviet regime. "The Cod Carp" was written by a couple of DFO officials. I recommend it for your reading.

Yes, we did get Mr. Turris. He spoke last week at length on the sablefish fishery.

My last question, Mr. Pearse, is on corporate concentration. People in the fishery are afraid that the licences would be bought up and concentrated into fewer and fewer hands, up to the point where they would be owned by one, two or three individuals, who will then be in a position to maybe move away. If the landings are moved away into other communities, where does that leave the community that depended on these stocks? Does the government then have to go in and relocate all the people in that community? Or do we just forget about these people? It is one of the problems that has been pointed out to us. I would like your comment on it.

The Deputy Chairman: We have under 15 minutes left to go and we have three questioners who have indicated. May we go to Sister Butts as the next questioner; after that I have a question from Senator Meighen and an intervention by Senator Stewart.

Senator Butts: Thank you. Mr. Chairman. Mr. Pearse, I am fascinated, but rather confused about your hesitancy to use the term "private property" with regard to the fisheries. I think you have said in an earlier statement, in another paper, that "common property is repugnant to the principles of the market economy," right?

Mr. Pearse: Yes.

Senator Butts: So if you are talking market economy, you are going to do away with the common property resource, but you do not want to call it private property. Do you have something in between?

Mr. Pearse: The antithesis of common property is sole property. That does not necessarily mean government. In other words, take the way we manage our forests or our minerals or our water, or any of our other natural resources in Canada; these are often, if not usually, Crown property. However, the Crown does not tell anybody to come and cut trees wherever they like. They allocate exclusive rights to individual people, so that you do not get people interfering with each other. I am talking about that. You do not have to make it private. You just avoid the common free-for-all problem that leads to "the tragedy of the commons," and we can do that with most other resources.

In the west here, people are allocated grazing, timber or water rights through a defined quantity that cannot be interfered with by other people. I am suggesting the same thing for the fishery.

Senator Butts: So you allocate it to a sole person?

Mr. Pearse: Or a company.

Senator Butts: Or a corporation?

Mr. Pearse: Or an Indian band. Or a corporation, yes.

Senator Butts: Is it excluded from other people? Or are other people are excluded from it?

Mr. Pearse: Absolutely, but that is not new to this, because even a limited-entry fishery has that characteristic, and it is accepted in all major fisheries.

Senator Butts: I see it as kind of a progression in the history of the fishery. At one time it was common property, and then you added exclusive, then you added durable, then you added transferable, then you added secure. What else do I have to add to make it private property?

Mr. Pearse: You have to add title.

Senator Butts: I think the licences are a kind of title. They are a title to fish.

Mr. Pearse: Please understand. You could give title to a fishery. For example, if you go to England and you go fishing in a fishery, or even in Nova Scotia, New Brunswick, or Quebec, you can find private fisheries. They are typically managed quite well. Certainly in England, private fisheries are managed extraordinarily well. You can certainly have private property in a fishery. It is just that, in law, a fishery can be private property, but a fish in the sea, the fish themselves cannot be.

Senator Butts: You stated that, in the early days, the fishery belonged to nobody. Does that mean the same as it belonged to everybody?

Mr. Pearse: Yes, it does.

Senator Butts: Then there is no distinction between nobody and everybody. Are you saying, if we go along with your plan, that the fishery resources are no longer publicly owned? Let me put it this way: If only chosen people who get a licence, or corporations, have a right to catch fish, is the fishery still publicly owned?

Mr. Pearse: Yes, indeed, as is the case with most of our other natural resources. The Crown owns them and allocates them to specific people, to the exclusion of others.

Senator Butts: Would you continue to prohibit the government from deciding the TAC?

Mr. Pearse: No, no. In Canada, under our Constitution, the major responsibility, which falls to the federal government, is to conserve the stocks. Under our present arrangements, nobody other than the government can do that.

However, having said that, there is no reason why the fishermen themselves could not do that, with strong private property rights. For example, if you allocated someone an exclusive right to a bed of molluscs, there is no reason why the holder of those rights could not manage them and preserve them in the same way that a farmer preserves his farmland.

The Deputy Chairman: We have eight minutes left on this portion of the satellite time. Senator Meighen, did you have a question?

Senator Meighen: Thank you, Mr. Chairman. Perhaps we should go back to those who come from areas other than downtown Toronto, where the fishery perhaps is not quite so vital -- directly speaking, of course. It is very directly vital in terms of the population that consumes the product.

This is a very basic question, Mr. Pearse: I must confess that I have some scepticism about this, given recent experience, but are you satisfied that we are up to the task of providing an accurate assessment of stocks? Because if you cannot do that, how the heck do you divide it up? I mean the record has not been exactly pristine, has it, in estimating stocks, whether it is northern cod or lobsters. I do not know the situation on the West Coast, but I suspect there may have been errors there, too?

Mr. Pearse: I think that is a very good question. The experience has certainly been mixed. The most fundamental responsibility of the government is to make sure that we do not overfish the stocks, and yet we have done it repeatedly. I take your point.

I would like to add that frequently the problem has not been the failure of science. Some of our stocks are extraordinarily difficult to assess, including our salmon out here. The problem has frequently been that the government has had difficulty constraining the fishery to the available catch. This has been aggravated hugely by the over-expansion of our fleets on both coasts. The size of the fleets has become so big that it has been almost impossible to carefully manage the fishery so that no more than the allowable catch is taken. It is very, very difficult.

As far as our competence is concerned, the Department of Fisheries and Oceans, notwithstanding all the flak it gets, has a very good science capability. However, we are dealing with some very difficult stocks and a fishery that is difficult to manage because government policy has allowed the fleets to get out of control.

Senator Meighen: I take your point. Plus, you are always fighting the last war, are you not?

Mr. Pearse: Yes.

Senator Meighen: You do not know what is going on until after the fishery has occurred?

Mr. Pearse: Could I add one more point about this, at the risk of sounding esoteric? One of the problems is that governments have tried to assess stocks on their own, more or less, by interpreting various sorts of information that come to hand or that they can get through research vessels and that they can infer from catch data, and so on.

They need the cooperation of fishermen. The fishermen are out there by the hundreds on the fishing grounds, and they know what is going on. Under our traditional forms of management, fishermen have no incentive to cooperate with the government, nor to cooperate with themselves. In fact, they are competing with each other.

The individual quota system generates incentives for everybody to start cooperating because they have a common interest in building up the stock and not just in catching a larger share of the limited pie. The incentives to cooperate are much stronger. That will certainly help in managing the fishery.

Senator Meighen: I tend to agree with you. My mind is uncluttered by knowledge or previous commitment to one side or another. It sounds from all of this that we have not done a heck of a good job in communicating the advantages, as you put them forward, of the ITQs.

If my information is correct, the United States has just imposed a four-year moratorium on the granting of further ITQs. It sounds like the same communication situation exists down there. Is that a fair comment?

Mr. Pearse: Yes, you are quite right, they have put a moratorium on them in response to pressures from certain fishing and environmental groups that are apprehensive about the scheme. However, they have not abandoned the idea. Incidentally, I was just talking to a group in New York last week about the surf clam fishery. The fishermen themselves are putting heavy pressure on the state government to introduce an ITQ system for surf clams in the state of New York. They have them just across the line in New Jersey, and they realize they are at a disadvantage to the New Jersey fishermen. They are very anxious to come on board. It is very much like the Alaska-B.C. situation with respect to halibut. They want it in that case, as well.

I think I had better leave it there. My answers are getting a bit too long.

Senator Meighen: Thank you very much.


Senator Robichaud: Dr. Pearse, you referred to different types of quotas and briefly mentioned community quotas. However, you seem to have some reservations about this. I direct your attention to the fact that in southeastern New Brunswick --


Mr. Pearse: There is a strong movement in some circles, particularly in British Columbia, that promotes the idea that quotas could be allocated to local fishing communities. This idea is aimed at trying to stabilize the economies of local communities to prevent them from declining. This is serious here in British Columbia because the federal government is now busily reducing the fleet.

While most of the fleet on this coast is based in the larger cities, there are, nevertheless, a number of coastal communities that are heavily dependent on fishing, and even a small reduction in the fishery will have the effect of seriously diminishing the economic opportunities of those small communities. Therefore, the idea is that, instead of giving the quota to fishermen, you could give it to these local communities somehow.

The point that I would like to make is that from the point of view of managing the fishery, which is the federal government's first responsibility, I do not think it will make much difference to the behaviour of the fishermen where they are based, whether they are based in Vancouver or in Bamfield, on a remote part of the west coast of Vancouver Island. It might make some difference to the community. In that case, where the government is embarked on reducing the fleet, as it is, the government should think carefully about this abrupt displacement of the economic base of those communities. There is an argument to do something about local communities, there is no question about that. I am very much in favour of government support to help fishermen who are displaced by fleet reduction.

However, giving the quotas to the local communities will not make much difference to the behaviour of fishermen. In other words, managing the fishery is helped by allocating individual quotas, but it will not be helped very much by giving them to local communities rather than to the fishermen themselves. Do I make myself clear?

Senator Robichaud: Yes, but we have had an experience in southeast New Brunswick with the raw crab -- the little crab that is close to the shore. A community was given a quota, which was divided equally amongst all the fishermen of the community. The quota in question was fished by only a few people but the return of the fishery was divided equally. It was a very good experience because in that part of the country the lobster stock is declining -- lobster was the main stay of the other fishermen -- and they need to look at other species to make up for that loss. The experiment in question proved to be good for the community.

Mr. Pearse: This is a very important point. I would like to make myself absolutely clear: I like that idea of allocating the quota among fishermen. If it is economic and feasible to tie it to the local community, I have no objection to that. Indeed, where we have locally based regulatory arrangements in other parts of the world, it works very well. There are ancient associations of prud'homie in France, on the Mediterranean Coast, where, since the middle ages, fishermen have regulated themselves through closely knit fraternal organizations. In Spain, there are similar organizations, called the "confradias." They are community-based organizations that allocate fishing rights within the community.

We have locally based fishing rights elsewhere; for example, in the freshwater fishery in Quebec, a system known as ZECs works very well.

On this coast, if we are talking about allocating quota, what I worry about is the mechanism that you would use to tie it to the community. To do what you did, as you described it on the south shore of New Brunswick, do you want the government to prohibit a fisherman from transferring his quota to somebody who lives outside the community? I object to that because I do not think it is the role of government, in the long run, to use artificial means to sustain communities.

The history of British Columbia, indeed the history of the whole of Canada, has been one of people relocating. Farmers moved off the Prairies, loggers moved out of logging camps all up and down the coast of British Columbia, and fishing camps. The world is better off because of it; people have moved to better places and better things to do. I worry about governments adopting policies that will prevent that kind of adjustment.

The Deputy Chairman: Mr. Pearse, this has been a very interesting presentation. You have made a remarkable contribution to this committee. I am sorry that we do not have an extra hour but we are bound by a satellite schedule that makes us run to certain deadlines. May I suggest that any further ideas that you have that may assist the committee would be most welcome. Again, thank you, on behalf of all members of the committee, for an outstanding presentation.

I have been asked by Senator Carney to convey her regrets that she was not able to be present tonight. She sent her assistant in her place and will review the transcript in the morning.

Mr. Pearse: Thank you, Senator Perrault. I also wish to thank your colleagues for their most interested attention. Thank you.

The Deputy Chairman: Our next witness is Mr. John Radosevic, president of United Fishermen and Allied Workers Union. He is very well known, particularly on Canada's West Coast. He has made a great contribution to our society.

The 8,000-member United Fishermen and Allied Workers Union represents the largest number of owner-operators of fishing vessels -- gillnetters and trawlers -- in the Province of British Columbia. In addition to representing deckhands on larger vessels, the union represents the industry's major wage-earning sector and negotiates annual minimum prices for net-caught salmon and herring with the province's major fish processors. In addition, the union is a founding member of the Canadian Council of Professional Fish Harvesters. We are very much looking forward to your remarks.

The format that we have adopted is a maximum of 30 minutes in the initial presentation by the witness, and then we go to questions. If your remarks are only 20 minutes long, then we will fill the time with more questions.

Please proceed, Mr. Radosevic.

Mr. Radosevic, President, United Fishermen and Allied Workers Union (UFAWU): Thank you, senator, for those kind remarks. We are no longer 8,000-members strong. Our membership numbers about 5,500, but we still are the largest organization, I think almost twice all the other organizations put together, of licence-holding boat owners. We also represent the deckhands and the people in the industry as you have indicated.

First of all, let me just preface my remarks with a couple of preliminary observations. First, I wish to apologize for not having submitted a copy of my remarks; second, I will have to read my remarks because I was up late last night preparing writing for this meeting -- we have been a bit busy on this coast, senators.

I also understand that senators have amassed a lot of important information on this subject, a subject that we have been addressing for some time, and I want to thank you for your interest and the time that you have taken to gather this information and do the work that you are doing. I think it is very timely.

In the brief that you will have in your hands by tomorrow, you will also see quite a bit about area licensing, as well as ITQs, or transferable quotas, or privatization. The reason for that is that Don Cruikshank, the commissioner who was assigned to deal with a lot of the privatization issues, quotas, and so on in 1991, indicates that area licensing and quotas are, in fact, one and the same, as they operate as functions of the Department of Fisheries.

Our preliminary objection to both transferable quotas and area licensing is that they can be leased or bought for the purpose of concentrating ownership or access to the resource, which is the privatization issues that you are addressing. Therefore, it is really that quasi property right that we oppose. If there were non-transferability provisions, if there were owner-operator provisions, both area licensing and owner-operating mechanisms could be useful management tools.

I will begin by addressing the issue of stackable leasing of area licensing. We do that because DFO is currently using that method of access to do in area licensed fisheries on the coast of British Columbia what individual transferable quotas do in many fisheries that you are familiar with.

Fisheries on the West Coast have undergone a period of wrenching change and upheaval. The policies that have governed the fisheries in Canada for decades are today being rewritten, and the fisheries themselves are restructured by the federal governments. Even as recently as the 1980s, a snapshot of the fishing industry on the Pacific Coast would have shown a different picture from what it is today. The federal government at that time was committed to fisheries as a common property resource; salmon enhancement and stock rebuilding programs were being funded; fisheries patrols and guardians were a familiar sight; and DFO maintained offices in communities throughout the coast. There was a diversified fleet of independent owner-operators, which provided the substantial part of the income for many of the communities.

We make that point not to paint an idyllic picture of the past, but really to emphasize that this is the legacy on which we want to build, the same legacy as we expected the Department of Fisheries to maintain. Instead, DFO and the federal government are moving towards abandoning those common property fisheries and are beginning to parcel out resources to special economic interests. We are seeing sweeping licensing changes, which are decimating the small boat fleet and many of the coastal communities that are dependent on that fleet. At the same time, the Department of Fisheries is dismantling the infrastructure that has traditionally supported fisheries in transferring the costs of maintaining what is left to fishermen, many of whom are becoming the new owners of an increasingly privatized resource.

There are really two visions: one, as we approach the end of the 1990s, the West Coast can look forward, from the traditions of the fishery, to see renewal and revitalized industry, which supports fishermen, shore workers and communities into the future; or we can take the corporate view, which seems to be favoured by Ottawa, which sees fewer fishermen, higher volume boats, centralized processing plants in major centres, and a fishery which is managed by the market, with a government role being reduced to that of facilitator in arranging the partnerships with private interests.

Probably the most significant indicator of the government's position is the proposed new Fisheries Act, particularly the amendments embodied in clauses 17 through to 22, which cover partnership agreements -- and I am sure you are well aware of what I am talking about. There has been a lot of opposition to the legislation by various fishing organizations across the country. I will not cover ground you have already heard, but I will point out what a draft bill prepared by Chris Harvey, Q.C., a noted Vancouver lawyer, had to say about the subject. He said that there are two courses open to members of Parliament on the issue of the Fisheries Act amendments.

One is to adopt the government's bill, which would allow the government to grant a fishery as a private right to any exclusive group, which would be to adopt a course that would be abandoning a fundamental freedom wrested from the Crown by the forced signing of the Magna Carta in 1215. The other course, of course, would be to maintain the fishery as a public resource by deleting clauses 17 through 22. It is our recommendation that the latter course be followed.

The issue of general mismanagement puts the whole issue of privatization and ITQs into the context in a very important way. It is important to note the DFO's failure to deliver on promise, policy and management objectives. Whether they be privatization, ITQ objectives, area licensing or de facto property rights legislation, the fact is that the government's failure to achieve their promises is profound, nothing short of.

If you look at what DFO's policy paper outlined, those objectives were: optimum sustainable exploitation rates; consultation with the fishing industry; equitable allocation arrangements, which allow participants an optimum share in the benefits; improved stability for the commercial fishing industry; expansion of the economic and social viability of coastal communities; and consistency with the principles of sustainable development. The bare truth of the matter is that the department is failing in all of those areas. It is not delivering optimum sustainable exploitation rates, either in domestic fisheries -- for example, the Skeena River sockeye fishery -- or in international interception fisheries, such as the problems we are having with the Alaskans intercepting the Canadian coho.

The Department of Fisheries has reduced, not improved, its consultation processes; they have become something that are manipulated by the economics branch rather than being true consultative processes. It has made a mockery of equitable allocation arrangements, and the Mifflin plan is one example. It has disrupted the stability of commercial fisheries. I think you know a lot about that. It has undermined the economic and social viability of coastal communities -- a view widely held in the coastal communities, by the coastal communities mayors and councillors and so on; it certainly is a vision that we agree is accurate, unfortunate but accurate. It has put more fisheries -- and here is one that we need to look at -- in biological jeopardy than any previous management regime in history.

On both coasts, communities and people dependent on fisheries are fed up with what they see as politically oriented licensing and management theories that have been rejected by people on both coasts repeatedly. The Cruikshank report in 1991 found that to be the case, as did the House of Commons Standing Committee on Fisheries and Oceans; and even more recently, the same was noted by Dr. Parzival Copes in an inquiry that was commissioned by the Province of British Columbia in April 1998.

The DFO is in denial. They refuse to heed the advice or concerns of independent people in coastal communities; that holds true for the advice of evident fisheries experts such as Dr. Copes, and even the Liberals' own representatives on the House of Commons Standing Committee on Fisheries and Oceans. We wish the Senate better luck.

I would hope that you would not consider my comments to be theoretical griping. The cost of continued mismanagement on people and the fish is too great to accept. We see the cod crisis in Newfoundland as being a tragic example of what will happen elsewhere if we cannot persuade Ottawa to change course, and soon. The condemnation of people living on Canada's East Coast could not be more scathing. In addition to that, Ottawa cannot continue to ignore the negative impacts of fisheries mismanagement on the country as a whole.

One witness in Newfoundland put it to the standing committee in the other place that their fishery had been consistently used by the national government as nothing more than a pawn to be bartered to promote foreign policy. Other witnesses question the wisdom of being in Confederation. I can tell you, from personal experience, from travelling up and down the West Coast, that similar sentiments are growing in most coastal communities in British Columbia as well. Ottawa is courting disaster by its continued insensitivity to the needs of coastal Canada.

You might ask why Canada is privatizing its common property fisheries. You know that one very popular shield the government throws up for nearly every criticism is that they do it for conservation. However, the conservation record in privatized fisheries -- that is, those fisheries that have either individual transferable quotas or those fisheries that have stackable transferable area licences -- is dismal. You only have to look on this coast at the record around abalone, B.C.'s first quota fishery, it is in shambles. It has being closed for conservation reasons. There are concerns about blackcod now, a fishery that has been governed by quotas for sometime. On the subject of herring, you have heard quite a bit, I know, in the media about conservation concerns around the herring. The devices either do not work as they were promised to do, or they never were intended to be conservation measures, and we believe the latter.

We fear that DFO is driven by cost-cutting considerations alone, without due concern for fish, for people, for quality of product, or the needs of coastal communities. I think that the DFO's true outlook is articulated quite well in their policy document, 2000, where it says that the costs of Pacific fisheries management will be totally recoverable by the industry in increased fees and royalties and other user pay or devolution arrangements by the year 2010.

In his report last month, Mr. Copes observed that transferable quotas and stackable area licensing were DFO's favourite management tools to achieve the department's aims. We would agree with that, but we take the emphatic view that fisheries resources and licences to fish them are not privately owned commodities. There are many things that we question with regard to DFO's grasp of the impacts of their policies. Active industry participants are now making less than what they earned a decade ago. I want to emphasize that nothing in the marketplace justifies such drastic income reductions as we are seeing in most fisheries. Licensing-related costs are one of the primary causes of fishermen's reduced incomes, despite the Department of Fisheries unfounded insistence that fishermen are economically better off under the fleet reductions programs of ITQs or stackable area licences.

The real results of those programs are massive job loss and widespread abuse of licensing privilege. Probably 70 per cent of the fleet in some fisheries are paying the landed values out in pre-season rental fees. Massive cuts in take-home pay for the most active fishermen and transference of wealth from active producers to inactive licence speculators and corporations is a reality.

Section 7 of the Fisheries Act says that a licence to fish is simply licence to engage in a fishery for the named species of fish using specific gear. Ursell Baker, Assistant Deputy Minister of Fisheries, not long ago said that as the fishing licence is a privilege, not the personal property of the licence holder, the department does not recognize the right of licensees to sell or lease license or quota privileges. Yet that is exactly what is happening; it is precisely what is happening.

I can cite many examples. The herring licence rentals. Again, I use the licence rentals interspersed with quota rentals because they are functions that the Department of Fisheries use; they are quasi-property rights and they function the same as ITQs do in other fisheries. I do not think that we can separate the way either work although they are very similar in the way they function.

I will not take the time to read my entire brief, but I recommend that you read the sections that deal with herring licence rentals, as an example of corrupt licence policies. There are those who make literally millions of dollars out of licence fees that are an abuse of the licence fee privilege according to DFO's own descriptions; they are doing nothing to stop that from happening.

It is important, as well, to understand other ramifications of this approach, and herring licensing is a good example. Those licences were initially issued on the condition that they be used only by the licence holder, but that provision was removed in 1979, and as a result the leasing of licences has become increasingly speculative. A 1988 DFO survey found that 47 per cent of all the herring licences and 65 seine licences, that is, in 65 per cent of all the gill-net licences, were subject to those lease agreements. That situation has grown worse, although we can only speculate how much because DFO will not give us updated versions of that information.

However, the trading of licences has led to the transferring from individual fishermen to corporations, and the DFO survey in 1988 found that companies held 31 per cent of the seine licences at that time. If you look at what DFO once limited them to, it was to 9 per cent, so the corporate concentration of those licences has grown exponentially; since 1988 it has grown worse.

Jobs loss, either for quota or area licence leasing. The union has often referred to DFO's leasing system as "job kill" programs. Again, I am using herring as an example. Of the 250 seine licence holders, only half actually participate in the fishery. So we have about 50 per cent of the herring seine deckhands having lost their jobs, never receiving one cent in federal assistance to retrain or find alternative employment; they were simply relegated to the scrap heap. Over a hundred seine licences holders have become speculators who stay home now and rent their licensees instead of fishing them.

Quota leasing not only results in job loss, but also it negatively impacts other aspects of the fishery. For example, after leasing a licence, not much value remains as earnings for active vessels and crews. Approximately $40 million is currently being paid out in licence rental fees. That money could be going towards much more productive ends if it were used by the industry and people that are active in the industry.

Another serious ramification is that quota leases or licence rental arrangements are usually completed well in advance of a fishery. If a crew later tries to negotiate for a fair share of proceeds, they usually find that a huge proportion of the value of expected production has already been committed in quota or area licence fees. It has become impossible for crews to negotiate for decent incomes. The result of this is that not only half the fishermen lost their jobs, but the survivors earn less today than they did a decade ago. How can that be economically good for either the people in the industry or the coastal communities?

The Mifflin plan is another example of how stackable area licensing functions as a quasi property right. We expect that, even though at the current time the transferability privileges are contained, if it is stackable and if it is leasable, which will probably happen in the near future unless we can stop that from happening in the salmon fishery, our largest fishery, the same problems will likely be visited on people in that fishery.

In 1997, in the gillnet fleet, for example -- just to give you a sense of the effect of the Mifflin plan -- the average income for fishermen from sockeye, as expressed as a value per licence, fell to $8,000 for northern fishermen, $15,000 for central area gillnetters, and $15,000 for southern gillnetters. Compared to 1993, the same cycle year, there were 30 per cent more boats. All were licensed to fish the whole coast, and when fish prices were roughly the same as they were in 1997. In 1993, the average value from sockeye for a gillnet licence was $23,000 compared to the $8,000, $15,000 and $15,000 that I just mentioned. Mr. Anderson or Mr. Mifflin can talk about people being better off but I have just cited an example where that is not true.

I will now talk about coastal communities, and corporate concentration. Corporate control of vessels and licences also negatively impacts on remote coastal communities. There are a number of reasons why that happens. Corporate fleet owners tend to moor their vessels in metropolitan areas. Villages that depend on fishing vessels for their economic and social viability are being left without access to off-season employment, or without their only means of transportation for social interaction and other community or regional centres. As a result, prospective fishermen lose the opportunity to gain valuable experience, and fishermen are inclined to move their families to urban areas if the boats they operate are moved from their control and access, except for the duration of the short active fishing season. Consequently, there are fewer ancillary fishing licences that stay with the community -- for example, cod, prawns, crab or otherwise. When the boats move out, people move out. The demise of these outports then becomes almost inevitable.

There are viable alternatives. If you see the problem as being what policy and administrative changes can be introduced to eliminate the leasing of licences and to curb the concentration of licences controlled by multiple licence holders -- and when I say "licence holders", of course, we are reading "quota holders" as well-- then we would recommend the introduction of the owner-operator provisions. We propose to retain the fishing privilege by active independent commercial fishermen. Second, we would recommend eliminating the unwarranted expense of resource rents being paid to license speculators.

Our third recommendation is to relieve crews from the burden of licence rental practices and to provide viable regulations and/or arbitration procedures to enforce the intent of that objective. We believe that we must relieve the industry in general from the onerous costs associated with licence or quota rentals by providing a means by which active fishermen may purchase non-owner-operator licences at market rates and convert them to owner-operator status. As well, we must continue to contribute to the economic and social structure of coastal communities and we must provide for the orderly training of the young entry-level fishermen.

Much more can be said, and we refer you to the Cruikshank report for a much more comprehensive view of what you are considering here today.

If individual quotas or area licensing are necessary as the best management tool for some fisheries, these quotas should not be transferable for stacking of fishing access rights. Area licensing and quotas should not be used as a method of fleet reduction. Ottawa must abandon its single-minded obsession with debilitating cost-cutting and cease spending on fisheries as an investment in future not as tax burden.

Amendments to the Fisheries Act could severely impact public access rights; therefore, changes that privatize our common property resource must not be allowed to happen. As well, a review of DFO's post-Mifflin policy direction should be carried out. Mifflin promised such a view.

In the meantime, it is our position that transition and fisheries renewal are linked and should be linked. We have what Newfoundland can only dream of -- that is, a habitat and a resource that can be renewed; unlike East Coast cod, the salmon habitat can be rebuilt. We also have under-utilized fisheries and so forth that need to be developed.

There are many recommendations for crews that we have also included in our brief, but the primary idea there is that quotas or stackable licences should not be construed as a licence to cheat the labour component of the industry, which has often been the case up to this point.

I have given you a lot of detail; I shall not go further. I welcome your questions.

Senator Stewart: On April 28 of this year, we had a witness from the Pacific Black Cod Fishermen's Association, Mr. Bruce Turris. Mr. Turris made what seemed to be a very convincing presentation for vessel quotas in that particular fishery.

Are you familiar with the blackcod fishery, and would you agree with Mr. Turris that in that particular fishery the vessel quota system, as it has been applied, has been a success?

Mr. Radosevic: Not at all. Mr. Turris now speaks for the Black Cod Association, but in his former life he introduced the vessel quota system while he was a Department of Fisheries official. Now he works for the people for whom he delivered the plan.

If you look at what is happening in the blackcod fishery, there are about 48 licences but only about 18 to 20 boats actually fish. The job loss in that fishery has been well over 60 per cent. Fishermen have lost almost all of their hard-won conditions. Quite frankly, it is a terrible way for Canada to manages its fisheries.

I shall cite one example, which I discuss in my brief. Of $181,000 gross stock in one case, $100,000 went to the absentee licence holder, while only $81,000 went to the crew. All fishing expenses were deducted from the crew's $81,000. Deckhands worked six weeks on that boat for approximately $2,100. The only time the owner of that licence was active was when he picked up his allocation, for absolutely peanuts, from the Department of Fisheries.

In that scenario, there is a massive exodus of capital to somebody who picks up a licence from the Department of Fisheries and then rents it out. That individual has two boats, which have fallen into disrepair, and two full crews that are out of work. He takes home all the money he would have taken home, plus the crew's share, and he saddles the active fishermen with leasing costs that makes their fishing operations marginal.

So, yes, the quota system works well for those who are renting their licences and for those who sit home and have that privilege, but it is not working well for the people who are actually producing the wealth. I do not think that is what the Government of Canada intended.

Ursell Baker has commented that the government did not recognize those privileges. The point I am making is the government is doing nothing about it, even though they did not intend it. The fact is, it is a terrible way for Canada to run its fisheries, not a good way.

Senator Stewart: That is very interesting.

Mr. Radosevic: That is only one example.

Senator Stewart: I will stay with it for a moment. Mr. Turris told us that the way that fishery was being conducted previously was really quite devastating for the resource. There was a rush to catch the fish. The boats that were used were not really suitable. Let me read a couple of sentences from his testimony, and you tell me if these are accurate. This is what he said, and I quote:

The quality of the fish diminished rapidly. Sablefish is a fish that needs to be handled very quickly after landing to maintain its quality, otherwise it degrades fast. It needs to be bled, iced or frozen, and stored properly. Quality diminished as fishermen were more interested in the race to catch as much fish as possible. Bleeding and freezing became secondary.

The implication, as a result of what he called "rationalization," is that you have a smaller number of active boats, they are better equipped to deal with the catch, and then the catch commands a much higher price on the Japanese market.

Is there an element of truth in that?

Mr. Radosevic: I do not think that the Department of Fisheries is totally dishonest, I do not think Bruce Turris is totally dishonest, and I do not think it would behove me to try to mislead you that there are problems in fisheries. My point is that the Department of Fisheries is not doing the best thing, either for the fish or to solve some of the problems that Mr. Turris has laid out. He indicated that the quality of the fish had diminished and that the fishermen were more interested in a race to the fish. I find that last comment to be insulting to the professional fishermen who I am sure delivered a good product.

I am sure that there are things that could be have been done, both before and after the introduction of quotas, to improve the quality of the product. I am absolutely certain that the conservation issue has not been dealt with, and it is my understanding that there are some quite serious concerns now -- anecdotally, mind you, but the fishermen are saying that the cod are not there. There are smaller fish. There are some real problems with conservation. Clearly, those issues have not been dealt with, nor have they in any other fisheries either, by things like the introduction of quotas.

He talks about the economics and so forth, but I wonder what answers he would have to the questions that I pose. What kinds of solutions are we proposing if more than 50 per cent of the value that was there and was going into the hands of active fishermen, providing employment -- and fishermen did make very good incomes prior to ITQs and Mr. Turris' plans, and now they are not working at all. There are less fishermen, and people are earning far less. It is not that the surviving crewmen are getting more fish and therefore making more money. In fact, crews are getting less because of the kinds of things I just outlined for you, with the inactive licence holder pocketing his licence, not going fishing, tying up his boat, and charging the active crew for 60 per cent, or for over 50 per cent for sure, of the value of the product.

So to answer your question, certain things were solved, but the cost of solving them, the prescription, was worst than the disease.

Senator Stewart: I gather from what you have said that you are opposed to the conferring of quotas?

Mr. Radosevic: We are opposed to the leasing and the quasi property rights nature of stacking licences or quotas. We think that area licences and quotas, if they are controlled by owner-operator provisions, to get rid of the licence speculators, if that provision is there and if the transferability is controlled, can become very useful management tools to control the pace of fisheries.

Senator Stewart: You would be agreed to conferring quotas on an exclusive group such as a coastal community?

Mr. Radosevic: I believe that it is time to have that debate. There are pros and cons to that. There are instances where it is time we started to look at area licensing and quotas more, say, by communities. I do not think people in communities are totally impractical or stupid; that they would not be looking for solutions to the exclusion of others. What Mr. Pearse and others have expressed about a new player coming into the game is driving opposition, but there are some benefits to be had as well. There are problems, as always there are problems, but I think that if people of goodwill can be brought together to negotiate, some benefits will ensue. Overall, there are some things we should be looking at insofar as community management is concerned.

Senator Comeau: I would like to get to the question of corporate concentration, or ownership concentration. You feel very strongly that there should be elimination of the transferability of quotas. If, in fact, the transferability is allowed to continue, where would corporate concentration potentially stop? For example, would it stop at within the community; would it stop at Bay Street; would it stop at Wall Street? If corporate concentration were allowed to continue, where would it end?

Mr. Radosevic: I do not think there is an answer for that? That is why we are so alarmed. I do not think there is an end to it, that we can see, unless we create an end to it, unless we say that not only do the interests of the corporations need to be looked after, which they do -- our members work in those plants; we need them to make the investments and do the processing -- the interests of people in the coastal communities, which include our members and fishermen, independent owner-operators and so forth, also need to be looked after. There has to be some mechanism that says that the corporations cannot just grab it all and that we in Canada are going to run our fisheries based on who has the deepest pockets to buy fishermen out and who has the total right to determine how much employment there should be in a common property fishery. We say that those are elements that the Government of Canada should decide, not corporations.

We know that we have to change. We know that we have to tailor our industry to the capacity of the fish and to the biological needs of the fish. However, after that, I think it is a matter for the Government of Canada to decide, in terms of how much wealth should come out of the industry or how many people should be employed. After all, this is a common property resource -- it belongs to the people of Canada -- not the private preserve of any corporation. The answer on that is nobody knows and that is why we are alarmed.

Senator Comeau: One of the concerns that has been expressed to us regarding concentration is that once the fishery is concentrated in a few hands, then the danger of moving stocks or landings from community to community, according to the fancy of the owner, the communities could be left completely without any source of income, if these quotas are transferred from one community to the next. Do you see this as a danger, as well, of the concentration?

Mr. Radosevic: You are not talking about a theory here. It is happening. It has happened. There are examples of it. It is no longer something that we oppose because theoretically it could happen; we are seeing it happen every day. We are seeing communities that are in desperate need now because of some of the policy mechanisms the Department of Fisheries has put forward. It has not considered the needs of people in coastal communities, it just does not consider it. Its primary and probably its only function is to consider how much it is going to cost. It is a short-sighted view because they do not think beyond that and ask, "What is it going to cost if we do not see fisheries thriving in these coastal communities?" The impact is tremendous and will have a negative cost. I think you do not have to ask that question; you just look at the record. It is there.

Senator Comeau: How do you respond to the comment that is made that the ownership provision of ITQs and individual vessel quotas somehow creates a sense of ownership on the part of the owners and, therefore, they become more responsible to the stocks, practice better conservation and alternately better stewardship, much more than the grubby race for the fish pirates that the other side seems to point to?

Mr. Radosevic: I think that a lot of those issues have always been smoke screens. They certainly have not worked as promised to prevent some of the problems that you have outlined. I think the primary cause for transferable quotas or transferable area licensing has never been to improve quality and some of those things. It has been to reduce the fleet, and to reduce it at no cost to the government, which is what it does. It has fishermen cannibalizing other fishermen.

There are no plans, no investments, no strategies to bring up the quality and to ensure that fisheries, which have been privatized with ITQs or with stackable area licensing, are conservationally sound. Again, the proof is in the pudding. Look at the record. And if what they intended, even if that was completely honest, if they intended that quality concerns and so forth would be addressed, it is only partially true. As I say, the cure has been worse than the disease.

Senator Comeau: The Mifflin plan did try to attack the problem of capacity, but I have been told that the problem was tackled by reducing the number of boats rather than reducing the capacity. What happened in the process was that these small boats, the least efficient boats, the boats that basically were not putting big pressure on the fish, were actually retired, and the very efficient boats stayed on to continue fishing. Do you know this to be the case, or is this a red herring?

Mr. Radosevic: No, it is absolutely true. It is absolutely true. The numbers are there, you do not have to accept my word. The seine fleet was reduced by 9 per cent. Something like 18 per cent or 19 per cent of the gillnet fleet, which are far less efficient than the seine fleet, was reduced. And then about 27 per cent of the troll fleet was reduced, which again is less efficient.

If you look at the catching capacity of the seine fleet, which is primarily in the hands of larger corporations, that was left mostly intact. We want the seine fleet to survive but, as I said, 9 per cent was bought back or reduced, so the capacity issue has not been answered by the Mifflin Plan.

What has happened, though, is that incomes have been reduced. I gave you the numbers in terms of what kinds of incomes people had before the Mifflin plan, in a year where there were similar production levels, where there were similar prices. When Mr. Anderson talks about price being the problem, in 1993, even though there were 30 per cent more vessels in the industry, people were making almost double what they made last year under the Mifflin plan.

One thing that the Mifflin plan did do is put control of the fleet into the hands of the corporations, gave them access rights that they could only dream of in the past. It did little else.

Senator Butts: I am interested in a part of what I might call your condemnation of the policies of DFO. Is it all right to call it that; am I quoting you correctly?

Mr. Radosevic: No. You are absolutely right. We are pretty unhappy.

Senator Butts: You described a partnership. Who are the partners?

Mr. Radosevic: I believe that the changes that were proposed would allow the minister to partner with anybody he pleased and to do functions that the Department of Fisheries is primarily responsible for now. What it would do would be to privatize functions, management and science functions that we oppose being privatized. If we are talking about a common property resource, if we are talking about fisheries, on either coast, that have problems that we all know about, it is time for the Government of Canada to upgrade its abilities to do these things, rather than to privatize them and to contract them out to whatever private concern it might be. I do not know if that answers the question fully for you.

Senator Butts: Could the minister partner with a community?

Mr. Radosevic: The minister could partner with a community, with a private individual, with a corporation, with anybody, as I understand it. I do not think there is any limit on who he can partner with.

Senator Butts: Do you think that that would be feasible for the community that you are interested in?

Mr. Radosevic: I think that would devolve the department's ability to manage. It would downgrade in all probability the quality of management expertise the department now holds. One of our chief concerns is that the Department of Fisheries has a long and proud history. We have not always agreed with management policies in the past, but we have always agreed that they had the best interests of the fish in mind, that they at least were trying to do the best for the fish and for the people in the industry, and that they had some priorities in that regard. We are no longer confident of that.

We feel that the general devolution in the Department of Fisheries has led to disasters for the fish. There is no doubt that it is leading to disasters for people in various communities. Certainly it has led to economic disaster for the people whom I represent. We are concerned about further devolution of enforcement, science, very important things as far as we are concerned. Management functions like that are not things that private corporations or private citizens should be taking over from the Department of Fisheries.

Senator Butts: When you speak of these quotas and the stacking of licences, especially by corporations, does that also include within that corporation a processing establishment?

Mr. Radosevic: I am sorry. I misunderstood you.

Senator Butts: I am speaking of processing plants in these communities.

Mr. Radosevic: We want to see the continuing existence of processing capacity in various coastal communities. There has to be some vision for that.

We are concerned. You do not have to take my word for it. We can mail you a copy of some of the position papers of the Fisheries Council of Canada. Their vision is that we have two major sockeye producing systems: one is the Skeena, one is the Fraser. The vision they have is to have processing capacity in the north, in the Skeena area, and processing capacity in the south, around the Fraser, and nothing much in between.

Their vision does not include employment opportunities in coastal communities. It does not talk about enhancement of stocks, other than sockeye. They oppose enhancement and rehabilitation work in some fisheries because they do not fit precisely within their vision of few fishermen catching a lot more fish per vessel, able to deliver it to the companies a lot more cheaply, and able to deliver profits to the companies, without them having to change the way that they have done things for hundred years.

If we have a criticism of the larger corporations it is that they have not done enough to bring in new products, to add value on their fisheries. We think that there is a conflict of interest between their fish farm interests. The companies we deal with on the West Coast are among the largest fish farmers. I think, for example, that Westons is the third or fourth largest fish farm producers in the world. There is a conflict of interest when, on one hand, they complain that they cannot face competition from cheap wild stock fish and, on the other hand, they complain they cannot face competition from cheap farm fish. They say both things, depending on who they are talking to.

Our fear is that there will be corporate concentration of the access to the fishery. We see corporate concentration in terms of place, with the larger companies basically able to take over quotas, take over the processing capacity from the smaller companies. We envision in coastal communities people having to move to these larger centres, north or south, in order to be closer to the processing capacity, to be closer to the vessels that are owned by the major corporations. We see people in the middle, in the smaller towns and villages, who used to depend on privately owned vessels, owner-operator vessels, independent fishermen who used to depend on smaller processing companies, perhaps some capacity to process for niche markets under-utilized species of various kinds, going by way of the dodo bird. Those are the concerns that we have got.

We would not argue with the fact that the major corporations also have to survive. We are in favour of that. We want them to survive. We want them to be healthy. We want them to put some investment into new product lines and to start opening their minds to some new ideas in terms of getting into different markets, if we cannot just do it in the old way.

Senator Jessiman: Are these licences renewable each year?

Mr. Radosevic: Yes, they are.

Senator Jessiman: And is there anything in the licence itself -- I know they are transferable -- but is there anything in the licence itself that says it is transferable?

Mr. Radosevic: No, I do not believe so.

Senator Jessiman: It is just a matter of what has happened in the past, they have been transferred.

Mr. Radosevic: It is a quasi property right, as we have been calling it. If the Government of Canada said, "You're not going to have it this year," I think the Government of Canada has the right to say that, but I think they would probably be facing a legal or court challenge.

Senator Jessiman: Over the years people have actually paid a lot for this.

Mr. Radosevic: Absolutely. That is why there has been a lot of work done, by Don Cruikshank and others -- and we have added some input into that -- in terms of how do we fix the situation without facing a legal challenge or without hurting people who have made those investments. We have got to find some way, and we have outlined that in our brief very simply, but it can be done.

Senator Jessiman: What you would really like is "use it or lose it." Is that right?

Mr. Radosevic: Owner-operated use-it-or-lose-it transferability restrictions. If then you wish to use quotas or area licensing as management tools, and they can be used quite effectively to either help to extend the season or to provide equal access and some of those things, we would be in favour of that, but not if they become property rights where the tradability function becomes more valuable than the product that they are actually there to produce.

Senator Jessiman: You are a member of the Council of Professional Fish Harvesters, are you not?

Mr. Radosevic: Yes.

Senator Jessiman: Is their view the same as yours?

Mr. Radosevic: I do not know. If their views are different, I do not know about it.

Senator Jessiman: You are a member of the council?

Mr. Radosevic: Yes, we are.

Senator Jessiman: You do not know what the council's views are? They have produced quite a large volume of work saying that a lot of it is related to how the East Coast best operates.

Mr. Radosevic: I am not aware of all the nuances of East Coast fisheries management. Maybe area licensing and quotas on the East Coast have a valuable function; I do not want to say that they do not.

I am speaking for the West Coast. Our views have been expressed very clearly in the context of the Professional Fish Harvesters association. They support what we say completely from a West Coast perspective. They are appalled, not necessarily with the concept of area licensing or quotas but by the result of stackable area licensing and transferable quotas on the West Coast fishery. Again, it is stackability and transferability that cause the problems. Otherwise, there probably could be a quite a degree of acceptance and agreement between us and the Department of Fisheries and the people, whatever they are doing on the East Coast.

Again, professional harvesters accept what I have just told you as being something that they support as far as the West Coast management is concerned.

The Deputy Chairman: Mr. Radosevic, on behalf of all of the members of our committee, I want to thank you for taking the time and trouble to attend here, particularly on such a wonderful sunny afternoon in Vancouver.

Mr. Radosevic: You are as charming as always, senator, and I appreciate it. I hope I have been of some assistance.

The Deputy Chairman: You have been a great help.

Mr. Radosevic: Thank you very much.

The committee adjourned.